Bed Bath & Beyond Collaborates with Kroger; Shares Jump 67.5%

Bed Bath & Beyond Inc. (BBBY) and The Kroger Co. (KR), one of America’s largest grocery retailers, have entered into a strategic collaboration. Following the partnership, while shares of the omnichannel retail company skyrocketed 67.5% in the extended trading session on Tuesday, shares of Kroger rose 1.5%.

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As per the terms of the deal, Bed Bath & Beyond will directly offer its wide variety of home and baby products to Kroger customers through Kroger.com. Moreover, its products will also be provided through select physical stores beginning in 2022.

Markedly, the partnership will include a range of products from bedding and storage to baby furniture from Bed Bath & Beyond and buybuy Baby products, along with the company’s exclusive Owned Brands as well as national brands. (See Bed Bath & Beyond stock charts on TipRanks)

Following the deal, the CEO of Bed Bath & Beyond, Mark Tritton, said, “Our collaboration with an exceptional retailer like Kroger underscores Bed Bath & Beyond’s authority in the home and baby categories. Today’s announcement is a key milestone, bringing Bed Bath & Beyond and buybuy Baby products to reach more customers than ever before. Our product assortment combined with Kroger’s customer base will present extensive opportunities for current and future customers.”

Other Developments

In a separate release, Bed Bath & Beyond announced the launch of its new digital marketplace. The move is expected to enhance the company’s existing presence in key home & baby categories and expand its range of key products with the integration of third-party brand partners into the company’s digital platform.

The company has also realigned its organizational infrastructure to support its strong business model.

Tritton said, “Marketplace is yet another example of how we continue to redefine our business model.”

Capital Deployment

Bed Bath & Beyond anticipates completing its $1 billion three-year share repurchase plan by the end of Fiscal 2021, two years ahead of its schedule.

To date, the company has repurchased shares worth $600 million since the end of Fiscal 2020. The remaining $400 million of the program is likely to be repurchased by the end of Fiscal 2021, mainly over the third and fourth quarters.

Tritton said, “Today’s announcement further underscores our ongoing confidence in our turnaround, and our ability to simultaneously generate positive cash flow, maintain a strong balance sheet and invest in our long-term growth, all while returning significant capital to shareholders.”

Wall Street’s Take

Recently, Morgan Stanley (MS) analyst Simeon Gutman downgraded Bed Bath & Beyond to Sell from Hold and decreased the price target to $12 (28.36% downside potential) from $18.

Gutman believes that the home furnishings group might decline in both 2022 and 2023. Notably, he believes that this “could be compounded by share loss” in line with Bed Bath & Beyond’s history.

Therefore, the analyst anticipates the company to miss revenue expectations in each of the next two years and sees “valuation downside in a negative comp backdrop.”

The rest of the Street is bearish on the stock and has Moderate Sell consensus rating based on 1 Buy, 4 Holds and 5 Sells. The average Bed Bath & Beyond price target of $17.60 implies 5.1% upside potential to current levels. Shares have decreased almost 19% over the past year.

Website Traffic

TipRanks’ Website Traffic Tool, which uses data from SEMrush Holdings (SEMR), the world’s biggest website usage monitoring service, offers insight into Bed Bath & Beyond’s performance. According to the tool, the Bed Bath & Beyond website recorded a 24.65% monthly decline, year-over-year, in global visits in September. Also, Q3 depicted quarter-to-date decline in 2021 of 24.65% more than quarter-to-date growth a year ago.

Notably, year-to-date website growth, compared to year-to-date website growth in the previous year, came in at 6.14%.